The dollar index (DXY00) today rallied sharply to a 1-month high and is up by +1.30%. The dollar is surging today after the US and China agreed to temporarily lower tariffs on each other’s products. Also, today’s jump in the 10-year T-note yield to a 4-week high has strengthened the dollar’s interest rate differentials. In addition, today’s soaring stock market and easing trade tensions reduce the chances the Fed will cut interest rates, a supportive factor for the dollar. The dollar fell back from its best levels after Fed Governor Kugler said US tariff policies are likely to boost inflation and weigh on economic growth, even with the recently announced reduction to tariffs on China.
The US and China agreed to temporarily lower tariffs on each other’s products for three months, with the US reducing its tariffs on China from 145% to 30% and China reducing its duties from 125% to 10%. Treasury Secretary Bessent Said that neither nation wants to “decouple” and that further talks might lead to “purchasing agreements” by China.
